Trading Cryptocurrency - Crypto Academy / S4W6- Homework Post for @reminiscence01".
Here is my homework post for beginners course in the steemit's Crypto academy season 4 week6 by professor @reminiscence
Explain the following stating its advantages and disadvantages
Spot trading
In Cryptocurrency trading spot trading is the direct purchase of Cryptoccurrency at the current market price with Available asset or value and the purchased crypto currency will be given to you immediately. This is the easiest form of trading as it is like the Normal exchange of a local currency with a foreign currency at the local bank with local currency.
As long as you have a value to pay for the purchase, you get whatever Cryptocurrency your want at the current market rate immediately. This method of trading are been utilised also that those willing to buy and hold for a long period of time to get gain from a particular Cryptocurrency.
I learnt about spot trading February 2019 and then I brought 100 steem with 20 usdt at the spot market and I sold it something around last month at 0.6 per $ making a gain of 40usdt.
| No | Advantages of spot trading | disadvantages of spot trading |
|---|---|---|
| 1. | It offers a easier trading that involves immediately delivery of my Cryptocurrency. | It's does not give room to make gains from trading the market if Market price Begins to drop. |
| 2. | The volume of your purchase is solemnly determine by you, as you have all power over the transaction quantity. | Trader might buy crypto currency at a very high price and have to wait for a very long period even just to avoid a loss on Their asset |
| 3. | It's gives a more flexible market as traders make wait for the market price to be as suitable for them as possible before making the trade |
Margin trading
Margin trading involves the use of your available asset or value as a collateral to borrow more value from a third party to increase your purchasing power for make trading, all with the aim of getting bigger gain with bigger value..jpeg)
The trader is required to put in a amount of their value to stand as a base on which the leverage of the risk is being made.
Margin trading allows the trader to trade both long and short market position, the long is the market position when prices rise while the short is the market position when the prices drop give the Margin traders a room to make gain on both form of market position.
| No | Advantages of Margin trading | disadvantages of margin trading |
|---|---|---|
| 1. | It offers a trading that gives more gain will little capital if the market favours your decision. | If the market don't favour your decision liquidation of your little capital is faster. |
| 2. | It give rooms for trading many Cryptocurrency with the little capital at hand by split them to stand as collateral for borrowing more funds. | Trader might have to use strategies to reduce loss as these trading involves higher risk, making the trading more complex. |
| 3. | It's gives a more flexible market as traders may long or short the market to make gain from the bearlish market |
Futures trading
Future trading involves the prediction of price of Cryptocurrency in a later time from the time the trade is initiated. It allows the prediction toward both the bullish or bearish market, which gives room for long and short trading. The trader doesn't buy the token but the future contrast which is a must buy for the buyer and must sell for the seller agreement of purchase price at a particular time against the current market price
The trader agrees to a long or short position by give the price of the Cryptocurrency will be at a particular future time. After the agreement is been made, as time passes the trade will shift towards a market postion give a profit or loss to the trader.
Just like in Margin trading, future trading gives room for purchase of contract with little capital by leveraging their value which allow either the buyer or the seller to close their trade but the initial agreement time.
To avoid liquidation of asset make proper analysis of the market and use reasonable leverage while trading future.
| No | Advantages of future trading | disadvantages of future trading |
|---|---|---|
| 1. | It offers a trading that allow the use of leverage and little capital, which allows more gain with the right prediction. | If the market don't favour your decision liquidation of your little capital is faster. |
| 2. | Hegding help to prevent the loss of asset and allow payment of little commission for large Trading transaction. | Trader might have to use strategies to reduce loss as these trading involves higher risk, making the trading more complex. |
| 3. | It's gives a more flexible market as traders may long or short the market to make gain from the bearlish market |
Explain the different types of orders in trading. How can a trader manage risk using an OCO order?
Type of orders in trading.
market order
limit order
stop limit order
OCO order
Exit order
market order: This is a trading order that involves the completion of the transaction immediately as the present market price is been use in the execution of the transaction.
The market order is a choice to consider only if the market has large number of user and will always have willing buyer or seller at any point in time.Limit order: This is a trading order that involves the completion of the transaction at a later time when the transaction price reach the market price. It allow a trader to open a trade for a time which he might not be available at the market to place the trade when the market reaches his desired price.
stop limit order: This is a trading order that involves the placing of a limit order when the market price reaches a set price which is indicated as the stop limit. This order will require the trader to input a stop limit price to place the order and a limit price for the execution of the order.
OCO order: OCO means one cancel the other, is a trading order that involves the placing of a limit order to be executed if the market goes bullish ora stop- limit order if the market go bearlish and at the execution of one the other order is been cancelled. This order will require the trader to input a limit price whih is greater than the current market price and a stop- limit price when is lower than the current market price.
Exit order: This trading order involves the placing of a trade to leave the market at a later time. The exit order are in two form. The first one, allow the trader to take profit and exit the market when the market is bullish and the second allows the trader to limit his loss at a particular price and exit the trade when make is bearlish.
How can a user manage risk with oco order.
As stated above an oco order allow the trader to input a limit order and a stop- limit order. This allows the user to reduce the loss incurred if the market price drops rapidly away from the prediction limit price. The limit price help to take profit and the risk is been manage as the stop-limit will execute if the market begins to drop, this is for a sell order
For example
I have 163 iotx token for sell and the current market price is 0.06815, to mange my risk , i use an oco order to place the trade at a limit price of 0.08 and a stop-limit of 0.065 just incase the market don't reach 0.07 and start to drop, this will minimise my loss and sell the token at 0.064.
Open a limit order on any crypto asset with a minimum of 5USDT and explain the steps followed
My usdt on the binance APk will be used for this transaction. After opening the Binance APK, I clicked on trade and then click on spot at the top of the page. Then I clicked on the pair to change to the desired pair I am willing to make the trade on which is the twt/usdt pair.
Then I confirmed to make sure the trade order is on limit, i then I inputed $1 as the limit price I want to buy my twt with the current market price at $1.0174 and the volume of 13 usdt. I opened a market order for it to be executed.
Using a demo account of any trading platform, carry out a technical analysis using any indicator and open a buy/sell position on any crypto asset
I proceed to liteforex to register for an account to be able to perform the demo trade. And I will be trading bnbusd using the macd indicator.
I choose bnbusd because binance token is a coin l'm very familiar with, and it is a coin with a proper base as it belongs to the No1 exchange platform in Cryptocurrency with it's own blockchain that utililies the BnB as a community token on the blockchain to pay for transaction fee.
I choose to use macd indicator because it help to provide trade signals using the trend direction indicated by the zero line and the macd line over a signal line that indicates a continuous trend movement or a chance of short trade or a change of trend position.
From my analysis of the macd indicator, the indicator shows that there is be a continuous upward movement as the macd is above zero and the macd line crosses above the signal line. I enter a buy order at 346.4 and exit at 345.5 with a trading volume of 1% and a profit of 90$ . So below is the screenshot of my analysis and opened trade.
Conclusion
Trading of Cryptocurrency is unavoidable in the crypto community. The earlier we learn the better as we can benefit from different form of the trade and different methods of trading them to either Maximize profit or manage the loss.
The volatility of the market can be taken advantage of as long as the right trade is been made on them, all of these ideas and knowledge do not grow in a day but can be accumulated by experience in the trading market.